Stockman: We’re Borrowing Our Way to Economic Disaster

David Stockman joined the Fox Business and the show Mornings with Maria to discuss the tax reform highlights for the current White House and GOP platform and what he views as a real threat of economic disaster in the U.S. During the discussion Stockman highlights what to expect from a border adjustment tax possibility, the creation of jobs and the impact on Wall Street in the age of Donald Trump.

Stockman takes to point the cause of tax reform in the current White House. He begins the segment noting, “I think the border adjustment tax will come out of the retailers margin – and it should. We do need revenue. We need to have a consumption tax, or a value added tax or a border adjustment tax – so that we may reduce taxation on wages and income. We desperately need more jobs in this country. If you keep taxing the payroll at 15.5%, which we’re doing today, you’re not going to encourage the creation of jobs. You’re going to take what jobs there are and impact the take-home pay of those jobs.”

David Stockman was then asked about his read on Donald Trump’s border tax proposals and the possibility of what the President described as a ‘reciprocal tax.’ “He has no idea what he’s talking about. He’s making it up as he goes along. Donald Trump is a tourist in the Imperial City of Washington D.C. He’s flipping, flopping and making it up as he goes.”

“The border adjustment tax, or a value added tax is the way to get at the problem he’s talking about. Every other country in the world has a value added tax. You take it off the exports and put it on the imports. There is a proper way to do it and he ought to allow the republicans on the hill who understand that to move forward. The idea that we can have a multi-trillion dollar tax cut and not pay for it with new revenue or spending cuts is dangerous. We are at $20 trillion in debt and it is headed to $30 trillion.”

When asked about the pragmatic nature of a border adjustment tax, Stockman pressed “I think it’s basic math. If you want to cut the corporate tax rate to 20%, which I think would be wonderful, you’ve got to raise $2 trillion over the next ten years to pay for it. Where are you going to get the money? Are you going to close loopholes? I doubt that. The lobby effort will kill that. You need a new revenue source. If you don’t do that you’re stuck with the current tax system. You’re stuck with massive deficits that are going to kill this country. We are basically borrowing our way to economic disaster.”

The host then pressed the former Reagan insider over what gets done between now and Thanksgiving on the debt limit and tax reform. Stockman said pointed and simply, “Nothing gets done. I am not trying to be a cynic. They will have battle after battle. The debt ceiling will get raised but there will be short term increases.”

“There will be shutdowns. There will be midnight confrontations and showdowns. It is going to happen over and over. Not just once, but multiple times. The order going into the next two years is government shutdown. It is going to be exactly what Wall Street does not see at all. The fundamental point is get out of the casino – it’s dangerous in there.”

The Fox Business News host then switched focus to discuss health care reform and what to expect from the GOP leadership that has a majority in Congress and control of the White House.

When asked what his take on savings, health care reform and why it is essential to moving onto taxes he remarked, “This is a huge mistake to go again at Obamacare, especially to save money. By the time they find anything that can get a majority vote in the GOP House caucus. Anything that would go through the Senate and to the President’s desk would have zero savings. The last bill started with $4 to $5 billion of savings and by the time they withdrew it on Friday afternoon, there was almost nothing left. That is a complete distraction.”

Secondly, the reason they’re doing it is the reason there will be no tax cut of the kind that Wall Street expects. We are so “deep in the soup” debt wise and have such a massive, and building deficit that you have to have revenue neutral tax cuts. The border adjustment tax is dead. Without that you are not going to reduce the corporate tax rate down to 20% or 15%, etc.”

“The Trump reflation fantasy is over. It is all downhill from here. The market it heading down 20 to 30% down, the 1600 on the S&P. We’re going to have negative shock after negative shock. It is about time they sober up. On April 28th the U.S government is going to shut down. That will be spring training on the continuing resolution until we get to MOAD in the summer.”

That’s what the former Reagan Budget Director has identified as the “Mother of All Debt” crises. He goes on to note, “We’re out of cash soon. The debt ceiling is frozen. There is no possible majority in Congress to raise, by trillions of dollars, the debt ceiling. That’s what is coming down the road”

To catch the full interview with David Stockman on what he views as an economic disaster, exactly what the debt ceiling means and more you can find the full Fox Business interview linked – CLICK HERE.

About Craig Wilson:

Craig Wilson is the Daily Reckoning’s Associate Editor. Prior working at Agora Financial, he was a researcher and writer who covered economics and international affairs. His work has appeared in The Nation, Bill Moyers, Tom Dispatch, Business Insider, ZeroHedge and other outlets. Craig holds a Master’s degree in International Affairs.